Hello Readers! 

We are on the last Thursday, the last day of the year 2020, you might have plans for the celebration of new year’s, dine-out or hang-out plans, or other plans. I do advise please follow the COVID-19 guidelines of the central government while you are hanging out so that your new year will be safe and sound for you!

Well, the year 2020 was COVID-19 pandemic year, in fact in the end, also it has scared people all over the world through its new mutant variant. The year 2020 not only frightened us but also has helped us grow much wiser, with many money lessons from this highly eventful year.

The year 2020 proved to be a tragic year for the market and individual’s finances, it made us realize what kind of changes people need to bring in their financial plan, to sustain a pandemic year like this in the future. Here are five money resolutions that you must take and follow to wade through New Year 2021, which is bound to feel the after-effects of the COVID-hit 2020.

#RESOLUTION 1

I Will Maintain A Large Emergency Fund!

During this pandemic many people lost their job, businesses shut shop, small businesses had to suffer, and many more. Many of us had to either withdraw our investment or had to step into our saving to carry out the basic household expenses. This was because many of us were living pay to cheque life. As soon as the regular source of income was stopped, we had to dip into our savings and investment that was actually meant for our future goals. 

However, people who already took the smart move and had their emergency corpus created, did not have to face many difficulties in carrying out their expenses, even when their regular source of income stopped anyhow! 

Emergency kitty is actually meant for these difficult times. Individuals are always suggested to first create their emergency corpus and then plan their investment for their, financial goals. This kitty should be held in liquid instruments such as fixed deposits or liquid mutual funds – to be used only in the case of contingencies arising from job loss or pay cut. Your emergency corpus should be enough to meet your monthly food and other expenses, including children’s school fees, EMIs, and so on. It should be large enough to take care of at least six months’ household expenses.

So, in this new year 2021, take the oath that you will first create an emergency corpus and then will plan for your other future goals. If you already had an emergency corpus built that was used by you in this pandemic, then I would suggest recreating it as soon as possible. 

#RESOLUTION 2

I Will Buy Adequate Health And Life Insurance!

A Healthy Life and health insurance cover, both are necessary and important for every individual, this lesson has also been taught by the COVID-19 pandemic. 

In India, people’s penetration towards health insurance cover is much low, which clearly shows that still there is a need to make people aware of the importance and benefits of health insurance cover. If you are in the age-group of 35-40, you must ensure that you buy a health cover of at least Rs 10 lakh for your family, to start with. Review your cover every five years and increase the amount in line with healthcare inflation.

#RESOLUTION 3

I WILL STICK TO MY ASSET ALLOCATION, SIP's! 

The market was trending at its lows in March 2020, and its aftereffects resulted in large redemptions. Many people stopped their SIP’s while many are withdrawn their investments. As per them, they saved their money, but actually, they actually stooped their money grow. 

The equity market performed good and started trending high in November 2020, those who sustained the downtrend of March 2020, gained good returns in November 2020. 

Equity markets are at new highs and fund houses are happily rolling out new schemes. When your portfolio becomes lopsided, do not forget your asset allocation, and remain stuck to that. 

#RESOLUTION 4

I WILL TAKE CALCULATED RISKS!

Investors are always advised, never to underestimate credit and liquidity risks in search of high returns. We know your main motive to invest is to get a good return, but you cannot ignore the risk associated with investments. Schemes investing in low-rated bonds, especially credit risk funds, are for those with a high-risk appetite. You must ensure that your portfolio is liquid enough. Well, this lesson was taught by the sudden winding up of Franklin Templeton’s bond funds. 

Well, well, not underestimating risk doesn’t mean that you should shun the risk altogether. The decision to take risks should be taken in the context of the investment objective of an investor. For example: When you are saving for an emergency fund, you should choose investments such as bank fixed deposits and liquid funds since they carry very low liquidity and credit risks.

#RESOLUTION 5

I Will Not Choose A Bank Merely For High FD Returns

The year 2020 saw more banks running into trouble, big names like YES Bank and Lakshmi Vilas Bank, faced the crisis. However, the Reserve Bank of India (RBI) took the initiative and got stronger banks to fashion a rescue act for protecting depositors’ interests. Here what depositors need to learn from this crisis is, never choose a bank merely for 50 basis points higher interest or because of the convenient location of branches. The safety of your deposits should be paramount.

For any kind of query regarding financial planning you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.

Happy Investing!

(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee for future returns).